Honda Updates Comprehensive Corporate Strategy

1/3/2001 6:16:28 AM

Honda Motor Co., Ltd., (NYSE: HMC) today
announced an ambitious strategy to enhance corporate value through a
major expansion of sales within each of its three product lines --
based on accelerated innovation throughout the company, including
manufacturing and research and development.

With annual sales achieving an all-time record of nearly 11
million motorcycles, automobiles and power products in the most
recent fiscal year (ended March 31, 2000), Honda announced a dramatic
new sales target of 16 million units for the fiscal year ending March
31, 2004. "Honda's goal is to be a company at the leading edge that
creates new values for our customers," said Honda President and CEO
Hiroyuki Yoshino, during a press conference at the company's
headquarters in Tokyo. "As a unique company with a variety of
'Powered by Honda' products and a wide- ranging customer base, we
will continue the challenge to enhance the value of the global Honda
brand."

Honda's FY 2004 sales target represents an expansion of all three
product lines; with motorcycle sales forecast to reach 7 million
units, an increase of 2.6 million units; automobile sales to reach 3
million units, an increase of 500,000 units; and power products to
increase sales by 50% to 6 million units. To achieve these aggressive
sales targets, Honda will focus on growth segments within each
product line. The biggest increase in motorcycle sales will be
achieved in Asia and other newly industrialized countries. Power
product sales will expand largely through OEM engine business. The
expansion of auto sales will focus on the growing light truck segment
in North America and strengthening the small car line-up in Japan and
Europe. Based on the long-standing philosophy of, "building products
in the markets where they are sold," Honda now has more than 100
manufacturing facilities in 33 countries. Sales growth in Honda's
three product lines will be based on this global production
capability, with increasing local content of those regionally
produced products. Beginning this fall, Honda will implement a new
global manufacturing system that will position the company to
establish a global product supply network to make the best use of
Honda's major factories around the world.

Region by RegionLooking at Honda's automobile business by region, the company
forecasts the following sales targets for the fiscal year ending
March 31, 2004:

North America: sales of 1.45 million units annually, up
150,000 units.

Japan: sales of 900,000 units annually, up 200,000 units.

Europe: sales of 350,000 units annually, up 100,000
units.

Other regions: sales of 300,000 units, up 80,000 units.

In North America, Honda will further expand the product lineup
concurrent with the expansion of local production. As previously
announced, Honda's new Alabama auto and engine plant will start
production in the latter half of 2001, a half-year earlier than
originally planned, in response to accelerating demand in the light
truck segment.

In Japan, Honda will adopt an aggressive strategy to launch more
than 20 new or full model change models in the near future --
particularly in the "RV" and super mini-car segments. This also will
include a new small model to be introduced in 2001 and targeted at
European markets as well. In Europe, Honda's second automobile plant
currently under construction in the U.K. will begin producing the new
Civic starting from Spring 2001, followed by a new small model in
2002. The total annual production capacity of the U.K. plant will
increase from the current 150,000 units to 250,000 -- as a result,
70% of vehicles sold in Europe will be locally produced. In addition,
the U.K. plant will begin exports outside of Europe for the first
time and will now be included in Honda's complementary global product
supply network to efficiently provide each region with models that
meet their needs.

New Global Manufacturing SystemLeading innovation in the manufacturing area is the
implementation of Honda's new manufacturing system on a global scale.
The company intends to double in-house resource efficiency through
the new system, which covers Honda's major vehicle and component
production facilities. This new system will increase the speed and
flexibility of Honda's global production system by reducing the time
and investment needed to bring new models to mass production, or to
add an existing model to a different plant. It will further increase
efficiency by significantly reducing the costs associated with
re-tooling for new model production. As a result, in FY 2004, Honda
forecasts savings of 100 billion yen when compared with FY 2000 --
even at the same production level. Further, similar production
systems will be applied to motorcycle and power products
manufacturing. Based on this savings and cooperative cost reduction
efforts by suppliers, Honda will either develop and aggressively
introduce more competitive products or increase per unit
profitability.

Digital Development TechnologyRegarding innovation in research and development, Honda announced
that it has developed and is utilizing a new Information Technology
(IT) development system for automobile product development called
"Digital Manufacturing Circle" (DMC). This advanced IT system works
as a global database network from design through production
engineering. Honda is using this new system to shorten new model
development time and to reduce the number of costly prototype models
required to achieve a production standard.

The Environmental ChallengeHonda is committed to a 3-stage approach to powering its motor
vehicles in the future: 1) maximizing the efficiency of new internal
combustion technology, 2) simultaneously, developing and expanding
the new hybrid system, 3) shifting to fuel cell powered vehicles,
when the necessary infrastructure is completed.

Notably, Honda is now developing an all-new "next generation"
series of compact, lightweight 4-cylinder gasoline engines with
significantly enhanced efficiency, performance and reduced emissions.
This new engine series will be introduced for mass-market products
this fall in Japan. All of Honda's gasoline 4-cylinder auto engines
worldwide will be replaced with this next generation series by
2005.

Also, Honda is now developing its IMA (Integrated Motor Assist)
gasoline- electric hybrid powertrain technology for use with this
next generation engine series. Honda will launch a version of the new
Civic with this innovative hybrid system in 2001, beginning with the
Japanese market, with plans to expand sales to other markets in the
near future. For motorcycles, a new model with more than 30% better
fuel economy will be introduced, targeting primarily customers in
newly industrialized countries.

Honda designs, manufactures and markets automobiles, motorcycles
and power products worldwide. Honda is the largest engine maker in
the world, producing nearly 11 million engines annually for its three
product lines, including sales of engines to other manufacturers.
Honda also builds products in more than 100 manufacturing plants in
33 countries, employing more than 125,000 associates globally.